Young Aussies struggling with debt, and we’re not even talking mortgages yet Link Gen Y Australians are increasingly taking on debt, and that’s before they even get to their first mortgage, according to RateCity’s Consumer Study August 2014.
The new research has revealed that respondents aged under 24 received their first credit card at an average age of 20. Of those who are 65 and older, the average first credit card age was 34.
CEO of RateCity Alex Parsons said that the trend is worrying, with young Australians taking on high levels of debt.
“Our research shows 42% of young people under the age of 24 have between $10,000 and $30,000 of personal debt, not including a mortgage,” said Parsons.
“Australians aged 24 and under are also four times more likely to get a weekly cash advance from their credit card than were their parents’ generation.”
He noted that 56% of Gen Y with a credit card have never had a $0 balance on their card in the past year, with 63% unaware of the interest rate they are paying.
“It’s a real concern, given that the average credit card rate is close to 17% – that’s a lot of interest we’re talking about there,” he said.
Credit card use is on the increase, with 1117,000 more incremental cards on the market now than last year, bringing the total to 15.5 million in May, according to the Australian Bureau of Statistics. RateCity noted that Gen Y was the most likely to sign up.
Parsons pointed to a shift in the way money is used – becoming a cashless society – that is potentially making people see funds as disposable.
“These are alarming new statistics and we think a number of factors are at play here, but regardless of the causes I’d urge young people to get in control of their money today to avoid a financial nightmare down the track – starting life in your 20s with tens of thousands of dollars can be crippling,” he said.
Any expressed market opinion is my own and is not to be taken as financial advice
A rather bearish thread for a change peter, you feeling OK or what, or was there something I overlooked.
Youve got to admit peter, debt levels at most levels are way to high, and the security and regulation of yesteryear has gone out the window.
The fact is peter, and like chris hedges mentions in the empire of illusion, we have all been turned into a commodity, all in the name of government monies rolling and corporate greed. But we are being sucked to death by the vampire squid as johnny frum likes to say, and the economy is being sucked to death as a rezult.
The most midless thing of all, is that the stupid banks are sealing their own fate. Sucking increasing amounts of interest through increased debt levels and longer lengths of time is simply sucking more and more from the overall economy .
These increasing record bank profits spell one quarantee, that there in increasing record amounts being drawn away from the overall economy.
Then we now have all these cash train loan bullshit throwing money as desperates to charge even higher amounts putting people and the economy further behind the eight ball.
I dont get what Gunna is on about, but whatever it is it seems to have some attraction for the younger set over at Macrobusiness
Gunnamatta August 16, 2014 at 9:10 am (Edit)
Yeah I know.
I’ve had mushrooms for breakfast, I take my powders and pills every day, get the strongest smokes I can lay my hands on, and drink more than I should. It is only the social stigma surrounding track marks on my arms and needles in public places that keeps me away from the big H, and pulling out a lighter to fry meth or crack isnt a good look either.
But no matter what I do I just cant seem to get myself seeing Australia’s body politic reforming its real estate addiction, or even doing something other than hoping an interest rate cut will save the day (sort of like the whole of society blowing the rent money on the favourite in the last, after the hot tip got rolled in the earlier group one race, and they have unsuccessfully doubled up each time since) on the road to ZIRP. I really do think that the real estate lobby will keep whispering sweet nothings into the ear of the electorate and both sides of politics while squeezing the nuts of the economy and banks just to let everyone know to be nice to the old men of FIRE and who will control the show.
Its sort of like Stalin came back as Australian real estate overlord and worked over the entire nation – what once was 1940s Pravda is morphed into 2010s Domain, and Itar-Tass 1952 is actually Realestate.com. We dont talk about the disappeared any more, the same as people unable to afford a simple dwelling in a moderately convenient suburb are unmentionable. The other, the evil, the unknown is come to life in human form as a real estate skeptic with a focus on the future of the economy, as Beria’s bastard descendants exhort not show trials, but auctions. The state is the people, one and indivisible, and questioning the state is to question yourself and lay open the path to reaction and revanchism, and mark yourself as a traitor and the goal is the endless rise of house prices. It will only be as Australia’s feeble economic body lay comatose on the floor drenched in its own urine, that an hitherto subservient underling will break for the right to seize power by shooting that once seen as convention, that we will see the cult of real estate goes on forever no more eternal than the cult of personality.
But for now it still is a case of ‘there has never been a better time to buy real estate’ – and this circus must throw out ever more grotesque imagery, with ever more bedazzling arrays of motion and sound, voices pitched to market tested perfection. Ensor like spruikatrons are never more than a few hundred metres away with advertising pamphlets and clipboards, with the glib, the specious, and condescending, and that contractually obliged to craft the inner punters vanity in potential home buying guise.
It is, we are, we will be until it isnt, and we will no doubt get a message from HQ when it happens – until then love it, live it, put your mouth around it and suck it or lick it (or get Peter Fraser around to help you whack it). It is real estate in your life.
A good thing I havent quit sniffing glue this week – yet.
You're talking about the current situation of these chumps now Peter. I distinctly remember these chumps sitting down with the realtors in home opens in Perth in particular saying all they had to their name was five grand for a deposit on homes listed at over $500k in the heyday of mining back in 2007/ 2008. .......and this is up in the northern Perth burbs when they were booming!
I remember the realtors telling them, they've come to the wrong home open.
Younger gen is hopeless, but you can't blame them either as now the job market is very depleted. They don't have much hope.
You're talking about the current situation of these chumps now Peter. I distinctly remember these chumps sitting down with the realtors in home opens in Perth in particular saying all they had to their name was five grand for a deposit on homes listed at over $500k in the heyday of mining back in 2007/ 2008. .......and this is up in the northern Perth burbs when they were booming!
I remember the realtors telling them, they've come to the wrong home open.
Younger gen is hopeless, but you can't blame them either as now the job market is very depleted. They don't have much hope.
I don't think that Gen Y are any better or worse than any other generation. People just make the best of what life deals them.
The writer of the OP has been a little deceptive when he said -
Quote:
The new research has revealed that respondents aged under 24 received their first credit card at an average age of 20. Of those who are 65 and older, the average first credit card age was 34.
The generation who are now 65 didn't have mass credit cards offered to them until around 1974 when Bankcard was introduced, so they didn't have the opportunity to get a credit card until they were much older. The take up was slow - Australians were not used to living on credit so credit cards were treated with great suspicion for some years.
Gen Y have been brought up with them. They see their parents use them so they don't have that same degree of concern. Boomers couldn't legally borrow until they were 21 until around the mid seventies but Gen Y can borrow at 18. Statistically things are stacked against Gen Y in this particular comparison.
Every generation has a percentage of losers who don't handle money or debt well. It should be a compulsory course in High School. What's the use in teaching trigonometry or organic chemistry if those students are going to bankrupt themselves before they turn 20. Being well qualified should also mean being financially responsible, even allowing for the normal exuberance of youth.
I think that in the end the majority of Gen Y will do just fine even if they do have to jump over some hurdles. They are educated and quite clever, they'll learn if they haven't already.
Any expressed market opinion is my own and is not to be taken as financial advice
The generation who are now 65 didn't have mass credit cards offered to them until around 1974 when Bankcard was introduced, so they didn't have the opportunity to get a credit card until they were much older. The take up was slow - Australians were not used to living on credit so credit cards were treated with great suspicion for some years.
Gen Y have been brought up with them. They see their parents use them so they don't have that same degree of concern. Boomers couldn't legally borrow until they were 21 until around the mid seventies but Gen Y can borrow at 18. Statistically things are stacked against Gen Y in this particular comparison.
My first few years of working, I got a pay packet every week with a payslip and currency. I didn't have a bank account.
I had to live off what I had and if I wanted something like a new TV, I had to save my money in a tin. Very often, I would see something I liked, decide to buy it and start saving only to decide a few weeks later that I really didn't need or want it that much. I had the luxury of never having to regret an impulse purchase.
I only got a bank account when my employer changed to paying wages directly into accounts. Even now I use credit cards only as a means of transaction. I have never paid a penny in interest on a credit card. I settle up the full amount at the end of the month.
I am pretty sure that if I was given a card with a 10k or 20k limit at 18, I would have gone straight out and bought a brand new Sandman panel van complete with 8 track stereo and a naked woman painted on the side. Instead, I bought a rusty old EH station wagon for $200.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
The generation who are now 65 didn't have mass credit cards offered to them until around 1974 when Bankcard was introduced, so they didn't have the opportunity to get a credit card until they were much older. The take up was slow - Australians were not used to living on credit so credit cards were treated with great suspicion for some years.
Gen Y have been brought up with them. They see their parents use them so they don't have that same degree of concern. Boomers couldn't legally borrow until they were 21 until around the mid seventies but Gen Y can borrow at 18. Statistically things are stacked against Gen Y in this particular comparison.
You could argue genY will do better off because they are more credit-card savvy earlier. I didn't get into the shit with a credit card until I was 28 and it caused me headaches for a while. I imagine most genY would have that worked out at a much younger age.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Many studies show people are more likely to spend on credit cards. Maybe they should make the cards display the balance? Shouldn't be hard.
It's hard to overstate how important credit cards are to the retail industry. I've touched on a number of roles in this area, and there are two main ways they encourage you to keep spending.
The first is developing ways to allow the purchase experience to be as as frictionless as possible.
Studies have shown that people are more likely to pay more for something with a credit card rather than cash:
[EDIT: newjez just realized it's the same research linked to in one of your links.]
NFC/Paywave is an example of this - It now makes most purchases easier and quicker than cash. In fact I use it so much that I'm starting to find the whole idea of carrying coins repulsive - I'll actually seek out cafes and take away bars that accept it. Which means asian food is usually off limits
One thing that will be interesting to see is how banks are reacting to this change - most phones have an NFC device built in, so the hardware is already available to make payments with it (although there's a little work to do yet in finalising security protocols) so they will soon lose the branding opportunities that physical card provided. So most are responding to this by investing heavily in apps that integrate with this feature.
The second is to reward those who spend big. There is a huge market for this, and it's really taken off in wealthier parts of Asia like Singapore and Hong Kong. I personally find the rewards programs like this pretty repulsive - i consider it a chore to reclaim prizes, and would rather they just offered me lower fees or the occasional special offer. Again, apps will help facilitate this form of loyalty program.
Regarding the problems of credit card debt, I totally get that is a lot easier to screw yourself up with this. It's well known in the banking industry that the best types or credit card users are the ones that are constantly paying off credit card debt with credit card debt, in a vicious cycle.
I was in London 10 years ago during the great consumer credit card explosion, when you would open the door to your flat and be greeted with a pile of letters containing credit cards that you could activate with a phone call. I knew then it was a disaster waiting to happen, just like the current low IR fuelled housing bull run in Sydney.
Hell, even Barclays' CEO came out back then and said using a credit card was a bad idea:
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
I dont get what Gunna is on about, but whatever it is it seems to have some attraction for the younger set over at Macrobusiness
Gunnamatta August 16, 2014 at 9:10 am (Edit)
It is, we are, we will be until it isnt, and we will no doubt get a message from HQ when it happens – until then love it, live it, put your mouth around it and suck it or lick it (or get Peter Fraser around to help you whack it). It is real estate in your life.
A good thing I havent quit sniffing glue this week – yet.
@notgunnamatta
Oh gunna is just cranky because I kicked his arse the other day. He is able to post anything that he wants over at MB whereas I often get censored if I reply.
He'll get over it eventually.
John Frum
18 Aug 2014, 05:36 AM
It's hard to overstate how important credit cards are to the retail industry. I've touched on a number of roles in this area, and there are two main ways they encourage you to keep spending.
The first is developing ways to allow the purchase experience to be as as frictionless as possible.
Studies have shown that people are more likely to pay more for something with a credit card rather than cash:
[EDIT: newjez just realized it's the same research linked to in one of your links.]
NFC/Paywave is an example of this - It now makes most purchases easier and quicker than cash. In fact I use it so much that I'm starting to find the whole idea of carrying coins repulsive - I'll actually seek out cafes and take away bars that accept it. Which means asian food is usually off limits
One thing that will be interesting to see is how banks are reacting to this change - most phones have an NFC device built in, so the hardware is already available to make payments with it (although there's a little work to do yet in finalising security protocols) so they will soon lose the branding opportunities that physical card provided. So most are responding to this by investing heavily in apps that integrate with this feature.
The second is to reward those who spend big. There is a huge market for this, and it's really taken off in wealthier parts of Asia like Singapore and Hong Kong. I personally find the rewards programs like this pretty repulsive - i consider it a chore to reclaim prizes, and would rather they just offered me lower fees or the occasional special offer. Again, apps will help facilitate this form of loyalty program.
Regarding the problems of credit card debt, I totally get that is a lot easier to screw yourself up with this. It's well known in the banking industry that the best types or credit card users are the ones that are constantly paying off credit card debt with credit card debt, in a vicious cycle.
I was in London 10 years ago during the great consumer credit card explosion, when you would open the door to your flat and be greeted with a pile of letters containing credit cards that you could activate with a phone call. I knew then it was a disaster waiting to happen, just like the current low IR fuelled housing bull run in Sydney.
Hell, even Barclays' CEO came out back then and said using a credit card was a bad idea:
At around 18% credit cards border on criminal behaviour by the banks. Whenever I get financial details off clients and they tell me that they don't have any credit cards I let out a little silent cheer.
The next best is someone with cards that don't carry much debt and the limits are low.
People with high limits that are fully utilised are their own worst enemies.
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